INCREASE Housing Affordability Act

Bill Number

H.R. 537

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2026-03-05: ASSUMING FIRST SPONSORHSIP - Mr. Magaziner asked unanimous consent that he may be hereafter be considered as the first sponsor of H.R. 537, a bill originally introduced by Representative Sherrill, for the purpose of adding cosponsors and requesting reprintings pursuant to clause 7 of rule XII. Agreed to without objection.

Last Updated

2026-06-24T08:07:55Z

AI-Generated Summary

Purpose of the Legislation

The INCREASE Housing Affordability Act aims to address housing shortages by incentivizing the conversion of underutilized commercial office buildings into residential units. It does this through tax credits for developers and by providing support to state and local housing agencies to identify and facilitate such conversions, ultimately increasing housing supply and affordability.

Key Provisions

• Tax Credit for Conversions (Section 2):
• Introduces a new "commercial-to-residential credit" under the Internal Revenue Code (IRC), equal to 15% of "qualified conversion expenditures" (costs for depreciable property used in converting buildings to residential or mixed residential-retail use).
• Credit limitations: Up to $200,000 per new residential unit created and $10,000,000 per building.
• Expenditures are counted in the tax year when the converted building is placed in service (ready for occupancy).
• Allows "progress expenditures" for long-term conversions (over 2 years), enabling partial credits during construction if elected by the taxpayer.
• Bonus Credits:
• Affordable housing bonus: Increases the credit by 10-20% if at least 25% of units are rent-restricted (rents limited by income) and occupied by low-income residents (based on 100%, 80%, or 60% of area median income; similar to low-income housing tax credit rules).
• Prevailing wage bonus: Adds 15% if workers on the conversion are paid at least the local prevailing wage rates (as set by the U.S. Department of Labor).
• Excludes certain costs (e.g., building acquisition, enlargements) and prevents double-dipping with other tax credits like the low-income housing credit (Section 42) or rehabilitation credit (Section 47).
• Applies to conversions starting after enactment, for buildings at least 15 years old that were previously nonresidential (office-leased) property.

• Commercial to Residential Conversion Advisory Board (Section 3):
• Establishes a board under the Department of Housing and Urban Development (HUD), with at least 20 members appointed by the HUD Secretary.
• Duties include providing technical assistance, best practices, and training to state and local housing agencies on:
• Identifying feasible conversion sites based on financial, logistical, and local housing needs.
• Analyzing floor plans and feasibility.
• Speeding up permitting and regulatory approvals.
• Reforming zoning barriers.
• Finding federal and state funding for projects.
• Authorizes $5 million annually for fiscal years 2025-2029 to fund the board.

Significant Changes to Existing Law

• Amends IRC Section 46 to add the new credit as a general business credit.
• Inserts new Section 48F detailing the credit rules, including definitions and bonuses.
• Makes conforming changes to IRC Sections 49 (at-risk rules), 50 (recapture and basis adjustments), integrating the credit with existing tax depreciation and investment rules.
• No prior federal tax credit specifically targeted office-to-residential conversions; this fills a gap by treating conversions like rehabilitation investments but with tailored incentives for housing.

Potential Impacts

• On Government Agencies: HUD gains a new advisory role to coordinate housing efforts; the IRS will administer the tax credit, potentially increasing workload for audits and compliance. State/local housing agencies receive tools to accelerate projects, possibly reducing permitting delays.
• On Citizens: Could increase affordable housing stock by converting vacant offices (e.g., post-pandemic remote work trends), lowering rents and improving access for low- and moderate-income families in urban areas. Developers benefit from financial incentives, potentially spurring construction jobs.
• On International Relations: Minimal direct impact, as this is a domestic tax and housing policy focused on U.S. real estate.

Main Stakeholders Affected

• Developers and Building Owners: Primary beneficiaries of tax credits, encouraging investment in conversions.
• State and Local Housing Agencies: Receive advisory support to identify and promote projects, aiding local housing planning.
• Low-Income Renters and Communities: Gain from bonus credits prioritizing affordable units, addressing urban housing shortages.
• Workers and Labor: Prevailing wage requirement ensures fair pay for construction roles.
• Federal Agencies: HUD (oversight of board) and IRS (tax administration) bear implementation costs.
• Local Governments: Impacted by zoning reforms and faster permitting, balancing development with community needs.

Notable Legal, Constitutional, or Political Implications

• Legal: Integrates with existing IRC frameworks (e.g., depreciation under Section 168, wage rules under federal labor law), but requires IRS regulations for details like lessee rules and progress elections. Recapture provisions (if buildings cease residential use) prevent abuse.
• Constitutional: No apparent challenges; uses Congress's taxing and spending powers to incentivize private action for public benefit (housing supply).
• Political: Responds to housing affordability crises and office vacancies without mandating changes, relying on incentives. Could face debate over tax expenditures (lost revenue) versus benefits, but promotes equitable development through income-targeted bonuses.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Sherrill, Mikie [D-NJ-11]

Cosponsors (5)

Rep. Garcia, Robert [D-CA-42], Rep. Magaziner, Seth [D-RI-2], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Harder, Josh [D-CA-9], Rep. Vindman, Eugene Simon [D-VA-7]

Recent Actions

• 2026-03-05: ASSUMING FIRST SPONSORHSIP - Mr. Magaziner asked unanimous consent that he may be hereafter be considered as the first sponsor of H.R. 537, a bill originally introduced by Representative Sherrill, for the purpose of adding cosponsors and requesting reprintings pursuant to clause 7 of rule XII. Agreed to without objection.
• 2025-01-16: Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
• 2025-01-16: Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
• 2025-01-16: Introduced in House
• 2025-01-16: Introduced in House

Bill Versions

• Incentivizing New Conversions to Residential Entities to Accelerate Supply and Expand Housing Affordability Act — issued 2025-01-16 — PDF (20 pages)